Insurance Articles

Insurance Articles

Hong Kong law firm, Oldham, Li & Nie (OLN) is pleased to have agreed a new collaboration with international law firm, DAC Beachcroft LLP as it continues to expand and develop new business groups.

The firms will draw on each other’s respective insurance and reinsurance practices and cooperate in additional areas of the law to provide a full range of services to clients in Hong Kong, based on DAC Beachcroft’s extensive insurance practice and OLN’s local Hong Kong expertise and relationships.

Greg Crichton and Adelina Wong will jointly lead the collaboration on behalf of OLN. Prior to joining OLN, Greg Crichton worked for many years in the insurance and reinsurance industry in Asia and was a Director, EVP and General Counsel at American International Assurance (AIA). Adelina Wong was a Senior Legal Counsel of AIA based in Hong Kong, and has significant expertise in Hong Kong’s insurance regulatory environment.

Insurance and reinsurance partner in DAC Beachcroft's Singapore office, Steven Dewhurst, who leads the firm’s Asian practice is driving this collaboration for the firm. Steven is admitted to practice in Hong Kong as well as England and Wales, and has decades of experience in insurance and reinsurance matters. As part of the move, Steven will also become a consultant with OLN.

"Closely collaborating with DAC Beachcroft, and its market leading insurance practice, is a tremendous development for OLN. It brings together a heavy weight team led jointly by Steven, Greg and Adelina, who share a profound knowledge of the global insurance sector and close client relationships in Hong Kong and throughout the Asia Pacific region." Stated Gordon Oldham, Senior Partner of OLN.

DAC Beachcroft Managing Partner, David Pollitt, said: "We are pleased to have formalised this new collaboration with OLN, a firm with deep local and sector knowledge and with which we share a commitment to our clients. Driven by client demand, this goes beyond simply cross-referrals; the new arrangement will enable us to provide comprehensive legal solutions for our multi-national clients in this important region for our business. We look forward to working with them."

Ends –
For more information, please contact Liz Kenyon on 2868 0696 /

By Adelina Wong, Consultant, Insurance, Oldham, Li & Nie


Vicarious liability is the legal doctrine that holds one party liable for wrongdoing committed by another, typically where the party held liable is superior to or has some right to control the other’s actions.  This most commonly arises in the employment context, where an employer is generally held liable for any tort committed by an employee in the course of his/her duties.  However, vicarious liability is not limited to the employment relationship and can extend to the relationship between insurer and insurance agent. 

Recent cases affirm that the relationship between insurer and agent can give rise to vicarious liability, even though the agent is not the insurer’s employee and the agent’s contract with the insurer explicitly denies any employment relationship.  In deciding whether to impose vicarious liability, courts will consider if this is fair, just and reasonable taking into account the overall relationship (including the insurer’s control over the agent) and enterprise risk considerations, including the insurer’s business model, the regulatory framework governing the insurance industry and deterrence of future harm.  In Hong Kong, many agents are tied exclusively to one insurer and even non-exclusive agents are bound under the HKFI Code of Practice to represent no more than four insurers, including no more than 2 long-term insurers.  These ties between insurer and agent, and the functions performed by the agent on the insurer’s behalf, tend to create circumstances where a court may find vicarious liability.

  1. Case Analysis

A recent Singapore case, in which a major life insurer was held vicariously liable for an agent’s fraud, is instructive.  In that case, the agent had sold the plaintiffs (an elderly Indonesian couple) a fictitious 5-year life insurance policy.  Funds remitted by the plaintiffs for the fake policy were used by the agent to buy unauthorized policies in the plaintiffs’ names, which the agent later deceived the plaintiffs into surrendering.  The funds were then misappropriated by the agent.  Throughout this process, the insurer relied on the agent to liaise with the plaintiffs regarding the policies they held and to transmit instructions as to how to handle their money, refund cheques and surrender proceeds. 

In finding the insurer vicariously liable for the agent’s fraud, the Singapore High Court applied a 2-stage test, under which vicarious liability will be imposed where:

  1. There is a “special relationship” between the tortfeasor (fraud perpetrator) and the defendant making it “fair, just and reasonable” for liability to be imposed; and
  2. The conduct of the tortfeasor is closely connected to his/her relationship with the defendant, particularly where that relationship materially increases the risk of the fraud being committed.

In applying this test for vicarious liability, the Singapore Court followed an established line of UK and Canadian caw law which identified two policy considerations for imposing liability:  1) effective compensation for the victim; and 2) enterprise risk theory, which holds that an enterprise which engages agents to advance its business interests and creates the risk of those agents committing wrongs against third parties should bear responsibility for the consequences, since it is best placed (and should be incentivized)  to manage the risks and prevent wrongdoing. 

Under the first stage of the test (requiring a special relationship between tortfeasor and defendant), vicarious liability is no longer restricted to employment relationships and the court will examine the facts to see if the relationship has some of the same fundamental qualities inherent in employer-employee relationships, including control over the tortfeasor (agent) and integration of his/her activities in the defendant’s (insurer’s) enterprise.  On the facts of the Singapore case, the court found that these elements were present, noting that even though the agent’s contract with the insurer specifically stated that the agent was not an employee, she represented the insurer exclusively and performed a wide range of functions on the insurer’s behalf.  Further, the insurer’s control over her was very similar to that of an employer training, managing, supervising and disciplining its employees. 

Turning to the second stage of the test (requiring a sufficient connection between the tortfeasor’s conduct and his/her relationship with the defendant), the court noted that the fraud had been perpetrated in the context of a business model in which insurers relied on agents to promote and market their policies by developing close relationships with high net-worth policy holders.  On the facts, the insurer further enhanced the risk of the agent’s fraud by allowing her to perform tasks on both sides without verification, including accepting her word as instructions and authorization from the customer.  Given this business framework and the policy justifications of victim compensation and deterrence, the court found that there was a sufficient connection between the agent’s fraud and her relationship with the insurer so as to justify imposing vicarious liability.

  1. OLN Insights

1.  Recent case law confirms that vicarious liability is not confined to employment relationships and can render an insurer liable for its agent’s fraud.  Courts will look beyond the agent’s contract with the insurer in assessing if the agent is truly acting as an independent contractor or is effectively controlled by the insurer and integrated within the insurer’s enterprise. 

2. Policy considerations, and particularly enterprise risk considerations, may lead a court to hold an insurer vicariously liable for an agent’s fraud in the current regulatory context, which (in Hong Kong as in Singapore) expects insurance companies to take responsibility for the management of its agents, particularly where agents are representing no more than a few insurers, and are seen by the public as representatives of their appointing insurer and an extension of their enterprise.

3. To mitigate exposure, insurers would be well advised to institute more robust controls to verify policyholder instructions rather than relying exclusively on agents to communicate with customers.  Verification should be undertaken of significant policy-related requests from policyholders, including instructions on how to apply remitted and/or excess funds and policy surrender requests.  For example, policy approval confirmation letters, premium payment letters, policy surrender letters and refund cheques could be mailed directly to the policyholder (with proof of delivery) rather than passed on through the agent. 



About OLN's Insurance Practice Group

OLN’s Insurance Practice Group has direct experience of the legal, regulatory and practical challenges facing insurers and reinsurers throughout Asia region. Members of our Group have worked in the insurance industry and have extensive experience working in and advising insurers and reinsurers on contractual and regulatory matters and risk management issues relevant to their businesses. We have particular expertise in the review and drafting of contractual documentation relating to insurance and reinsurance activities, including the development of policy wording for life, accident, medical and health insurance products, and the review and vetting of related proposals, product brochures and training materials. We also have experience advising on disputes over coverage for claims under both life and general insurance policies, and with support from OLN’s Dispute Resolution Group, are well placed to represent clients in all aspects of insurance litigation.


For more information about any other insurance related matters, please contact:

Greg Crichton, Consultant


(852) 2868 0696


Adelina Wong, Consultant


(852) 2868 0696



Making an Apology

Wednesday, 09 August 2017 18:13

Making an Apology


Parties in conflict and disputes rarely apologize to one another. No one wants to admit liability, and saying sorry is often seen as an admission of liability.

On 13 July 2017, the Legislative Council of Hong Kong passed the Apology Bill (soon to be the Apology Ordinance) to enable parties to apologize without fear of legal implications.


Historically, an apology is seen to be an implied admission of fault and/or liability. Such apology, whether written or oral, may constitute evidence of liability in civil proceedings.

Parties in dispute are therefore constantly advised by lawyers not to apologize for their actions, even if the party is in the wrong. The fear of legal implications overrode morality and common decency.

The Apology Ordinance

Under the Apology Ordinance, an apology is defined as an expression of regret, sympathy or benevolence. The apology need not be in writing. It can be oral or by conduct.

If a party has apologized, the Apology Ordinance provides that the fact of that apology will not constitute an express or implied admission of the person’s fault or liability and must not be taken into account in determining fault, liability or any other issue in connection with the matter to the prejudice of the person.


While evidence of an apology made by a person is not normally admissible as evidence for determining fault, the Apology Ordinance makes an exception. The exception is this:

If there is no other evidence available for determining an issue, it is possible for statements of fact contained in an apology to be admitted as evidence in the proceedings, provided that it is just and equitable to do so.

The following example may trigger the exception. One party may say to another:

“I am sorry about what has happened”

The above would not normally be admissible as evidence on liability. However, the situation may be different if the party apologizing goes on to say the following:

“The goods were not delivered to you because we had inadequate staff on that day.”

The above might be admissible as evidence even if the apology itself is not, particularly if the fact of adequate or inadequate staff became a relevant issue in civil proceedings and this was the only piece of evidence available in the proceedings. Clearly, this exception means that parties should take great care in how they apologize and what they should include in their apology.

Insurance Coverage

The Apology Ordinance also has potential impact upon insurance coverage.

Section 10 of the Apology Ordinance provides that an apology does not render void or affect any insurance cover, compensation or other form of benefit for any person in connection with the matter. There is also an express prohibition against attempting to “contract out” of this section by, for example, a disclaimer or waiver of rights. This section also takes effect whether or not the contract of insurance was entered into before or after the commencement date of the Apology Ordinance.

Liability insurance policies typically contain conditions that an insured party shall not make any admissions of liability or prejudice the claim without the insurer’s prior consent. While Section 10 may avoid an admission of liability, potential problems may arise if the insured prejudices the claim by making an apology which contains facts that are later ruled as admissible by the Court for the reasons set out above. In such circumstances, there may be argument as to whether the additional facts appended to the apology can properly be regarded as being part and parcel of the apology itself.

When Will It Take Effect?

It is currently unclear as to the commencement date of the Apology Ordinance although it is expected to come into effect later this year (2017) or early next year (2018).


With the implementation of the Apology Ordinance, being the first jurisdiction in Asia to do so, Hong Kong is leading and consolidating its position as one of the foremost centers in the Asia region for mediation and dispute resolution.

Although similar legislations have been passed in the United States, Canada, Australia and the United Kingdom, only time will tell whether the Apology Ordinance will influence parties in Hong Kong to more readily apologise to each other for wrongful conduct.

What should be quite clear however is that making an apology is not all without its risks and parties should continue to take proper legal advice before doing so.

By Stephen Chan

GL4: Guideline on 'Fit and Proper' Criteria

Wednesday, 14 June 2017 13:56

by Greg Crichton and Adelina Wong


The Provisional Insurance Authority ( the ‘PIA’) is already in action and has just written to the Chief Executives of all authorized insurers (‘Insurers’). The communication covers two Guidance Notes ( previously ‘GN’ and now ‘GL’). Here we will focus only on one in summarizing what the PIA had to say in their letter.

GL4: Guideline on 'Fit and Proper' Criteria

New section 14A of the Insurance Ordinance will be effective on 26 June 2017. Section 14A sets out a list of matters that the Insurance Authority (the "IA") must have regard to when determining whether a person is 'fit and proper'. This is a new section which is applicable to controllers, directors, key persons in control functions and appointed actuaries of all Insurers. GL4 sets out the minimum standard of suitability requirements for these persons.

Transitional Arrangements for Key Persons in Control Functions:

Some Insurers may currently maintain one or more control functions and certain individuals may have been responsible for one or more of these control functions prior to 26 June 2017.

The IA shall introduce the following transitional arrangements effective 26 June 2017:

  1. For individuals who are responsible for any of the control functions of an Insurer before 26 June 2017 and within the definition of 'key persons in control functions' (the "Appointed Individuals"), relevant Insurers are required to submit applications for the IA's approval of their proposed appointments on 26 June 2017. Such applications must be submitted to the IA during the period from 26 June 2017 to 30 September 2017.
  2. They should be provided in the prescribed Form A1
  3. Application fees: HK$18,000 will be waived in respect of applications of the Appointed Individuals.
  4. The IA will consider and will notify the insurers of the application results as soon as practicable.

Transitional arrangements apply to the Appointed Individuals only. If an Insurer wishes to appoint an individual as a key person in any control function(s) on or after 26 June 2017, it must obtain the IA's prior approval.

For controllers, directors and appointed actuaries of Insurers who have already been duly appointed prior to 26 June 2017 in accordance with the relevant requirements, they are not required to seek the IA's re-approval. However, if an Appointed Individual assumes a dual role of both an appointed actuary and a key person in the actuarial function, approval will still be required.

by Greg Crichton and Adelina Wong


Effective on June 26, 2017 (“D-day”), the Hong Kong independent Insurance Authority (“IA”), will take over the duties of the existing Office of the Commissioner of Insurance (“OCI”) relative to the regulation of authorised insurers in Hong Kong, and the OCI will be disbanded. This take-over has been two years in the making, starting with enactment of the Insurance Companies (Amendment) Ordinance 2015 (“ICAO 2015”) in July, 2015.

The ICAO 2015 provided for a three stage transition under which a new regulator (independent of industry and the government) would take over the OCI’s functions, and assume and exercise new statutory powers over both insurance companies and insurance intermediaries. D-day marks the completion of the second stage, with the IA replacing the OCI to take over the regulation of authorised insurers. Thereafter, the IA is expected to take over the licensing and regulation of insurance intermediaries from the three intermediary self-regulatory organisations within 2 years from D-day, completing the third stage of reform.


IA Governance Structure

Under the ICAO 2015, the IA comprises of the following members appointed by the Chief Executive:

  1. A Chairperson who is a non-executive director (“NED”);
  2. A CEO who is an executive director (“ED”); and
  3. No less than 6 other EDs or NEDs, with the number of NEDs exceeding the number of EDs.

Effective on December 28, 2015, Dr. Moses Cheng was appointed as Chairman of the IA and seven NEDs with relevant industry/professional/occupational experience) were also appointed. Subsequently, on May 5, 2017, Mr. John Leung Chi-yan, the incumbent Commissioner of Insurance, was appointed as CEO of the IA for one year from June 26, 2017 to June 25, 2018. According to the Secretary for Financial Services and the Treasury, secondment of Mr. Leung to the IA for one year “will ensure a smooth transition while allowing more time for the IA to search for a suitable candidate to fill the CEO post”. Concurrent with Mr. Leung’s appointment, 4 EDs were also appointed for 3-year terms pursuant to a selection process chaired by the Chairman of the IA.


New Fees and Charges

Some of the more immediate repercussions of the commencement of regulation by the IA are increased annual authorization fees and new user fees on specific IA services which will be in effect from D-day onwards, including the following:

  • Annual authorization fees payable by authorized insurers increased from current rates (e.g. HK$227,300 for long-term/general business) to a higher fee consisting of: i) a fixed fee (e.g. HK$300,000 for long-term/general business), and ii) a variable fee of up to 0.0039% on insurance liabilities to be phased in over 6 years, subject to a variable fee cap of HK$7 million annually.
  • Application fee for approval of the appointment of a controller/director/key person in control function under section 13A or 13B or an actuary under section 15(3A) of the Insurance Ordinance: HK$18,000 per application
  • Notification fee to propose a person to become a controller (i.e. person with/controlling at least 15% of the voting power at any general meeting of the insurer): HK$100,000 per notification where proposed controller holds/controls 50% or more of the voting power; or HK$50,000 per notification otherwise.

These fees are consistent with the long-term objective that the IA will finance its own operations and become financially independent of the government. To the same end, in addition to collecting authorization and user fees from insurance companies/users of IA services, the IA is also empowered under the ICAO 2015 to collect a levy on insurance premiums from policyholders. It is expected that this levy will be implemented by January 1, 2018.


Notifications and Approvals

To tie in with the ICAO 2015 provisions relating to IA approval of directors and key persons in control functions (as well as controllers) as “fit and proper persons” to be appointed, amended forms have been prescribed for use after D-day for submitting particulars in respect of those proposed to be appointed to such roles at an authorised insurer. Under the ICAO 2015, “key persons in control functions” include those who are responsible for any of the following functions who exercise a “significant influence” on the insurer’s business:

  1. risk management;
  2. financial control;
  3. compliance;
  4. internal audit;
  5. actuarial; and
  6. intermediary management.

Notably, the amended forms request additional particulars of the reporting structure or reporting lines that the director/key person in control functions has in relation to people within the insurer, people at the insurer’s head office and/or people at the insurer’s parent company (as appropriate).

While the IA approval requirements on their face seem to apply only to appointments made after D-day, the IA has now announced transitional arrangements whereby appointments of key persons made by authorised insurers prior to D-day must nonetheless be approved by the IA after the fact. However, the application fee for approval of those individuals has been waived.


Investigation & Displinary Powers

On D-day, a majority of the provisions of the ICAO 2015 will come into effect, at least as they pertain to the regulation of authorised insurers. These include the new regulatory powers conferred on the IA to conduct inspections and investigations relative to authorised insurers without a warrant; and greater disciplinary powers of the IA, including the power to impose a pecuniary penalty for misconduct of up to the greater of HK$10,000,000 or three times the amount profit gained/loss avoided by the insurers as a result of the misconduct. In the near future, it is expected that the IA will issue a new guideline (GL18) setting out the considerations in exercising its power to impose the pecuniary penalty.



With the commencement of the new regulatory regime under the IA on D-day, authorised insurers in Hong Kong must implement policies and processes to ensure compliance with the new regulatory requirements, including “fit and proper” assessments of controllers, directors and key persons in control functions and notifying the IA of new appointments. Insurers will need to stay current on regulatory developments, which will include issuance by the IA of an updated guideline on “fit and proper” criteria (GL4) to replace existing Guidance Note 4. Meanwhile, the IA is expected to push ahead with other regulatory reforms including a risk-based capital framework for insurers and a policyholders’ protection fund initiative. The Hong Kong insurance industry must brace itself for significant challenges and higher costs of compliance in adjusting to the new regulatory landscape.


Useful Links: [IA Appointments Press Release dated May 5, 2017] [D-day Press Release dated April 19, 2017] [Legco Brief] [Insurance Companies (Authorization and Annual Fees) (Amendment) Regulation 2017] [Insurance Companies (Register of Insurers) (Prescribed Fee) (Amendment) Regulation 2017] [ICAO 2015]


About OLN’s Insurance Practice Group
OLN’s Insurance Practice Group has direct experience of the legal, regulatory and practical challenges facing insurers and reinsurers throughout Asia region. Members of our Group have worked in the insurance industry and have extensive experience working in and advising insurers and reinsurers on contractual and regulatory matters and risk management issues relevant to their businesses. We have particular expertise in the review and drafting of contractual documentation relating to insurance and reinsurance activities, including the development of policy wording for life, accident, medical and health insurance products, and the review and vetting of related proposals, product brochures and training materials. We also have experience advising on disputes over coverage for claims under both life and general insurance policies, and with support from OLN’s Dispute Resolution Group, are well placed to represent clients in all aspects of insurance litigation.

For information about any other insurance related matters, please contact:

Greg Crichton, Consultant
(852) 2868 0696

Adelina Wong, Consultant
(852) 2868 0696